VIENTIANE, Laos - This former French colonial city is fast yielding to a new
outside influence as Chinese investors bid to build a new satellite city in the
mold of the many industrial towns popping up across their homeland. A
controversial joint-venture project to build a Chinatown on the northeastern
outskirts of Vientiane has upset residents and prompted new concerns about
China's fast-growing influence over its smaller neighbor.

The Lao government recently signed off on a plan to allow Chinese developers to
build shops, factories, hotels and housing in the city's underdeveloped and
some say environmentally significant That Luang marsh area. Under the
development plan, the project will cover 1,640 hectares, with buildings taking
up less than 1,000 ha and the remaining two-thirds of the area reserved for
water

resources and leisure areas. Construction and land clearing has yet to begin.

The "New City Development Project", as the government refers to it, involves a
joint venture between three Chinese companies managed by the Suzhou Industrial
Park Overseas Investment Co and a Lao partner. The terms of the agreement,
first announced in September 2007, give the Chinese company a 50-year
concession, with a possible extension for another 25 years, while the Lao
partner retains a mere 5% share in the project. The project will revert to Laos
once the concession period has ended.

The project has sparked public dissatisfaction among the country's repressed
populace and prompted the government to make a rare public explanation of its
policies. Standing Deputy Prime Minister Somsavat Lengsavad defended the
government's actions in February and denied accusations made by the media and
fueled by widespread rumors that an agreement had been made to bring in 50,000
Chinese to populate the new satellite city and claimed no special concessions
would be made for Chinese citizens.

He said the deal had been negotiated during a meeting with the governor of the
China Development Bank (CDB) to seek a US$100 million loan to build a
20,000-seat stadium and related sports complexes for use during next year's
Southeast Asian (SEA) Games, to be hosted in Vientiane. The government hopes
the event will showcase the country as a destination for investment and
tourism.

The CDB governor made the loan contingent on Laos offering a suitable piece of
land for a favored Chinese company to develop. According to Somsavat, the
Chinese company, which has developed the Suzhou Industrial Park in China's
Jiangsu province, will be allowed to benefit from the sale of buildings,
industrial units and residences in the new satellite town. Laos will benefit
from a new urban development without having to seek loans for its construction,
he said.

During a follow-up press conference in March, held to again explain the project
and deflect sustained criticism, Vientiane's mayor Sinlavong Khoutphaythoune
told journalists that there were three main reasons for the new town's
development. First, it was consistent with the government's declared policy of
using domestic resources, including land, as capital to develop the country.
Second, it was a form of repayment for China's funding and building of a
stadium for the SEA Games. The final reason he gave, ironically, was to
preserve the marsh area.

Groups such as the World Wildlife Fund estimate the 20-square kilometer marsh
area provides aquatic resources for about 3,000 households and 17 villages and
provides flood protection for the city by acting as a reservoir for flood
waters during the rainy season. The protection provided by the marsh is valued
at $2 million and the avoidance of damage caused by floods estimated at over
$18 million.

The marsh area lies at the bottom of a low hill topped by Laos' most famous
Buddhist monastery and national symbol, That Luang, as well as its National
Assembly. According to government spokesman Yong, as recently as 30 years ago
nobody lived in the area, some of which the government drained to fight
mosquitoes and reclaim land for agriculture.

The area around the marsh is now a mix of residential buildings and bustling
commercial properties, including several markets selling fresh produce, dry
foodstuffs and other commercial goods. People living along the marsh maintain
rice and vegetable fields and gather edible plants from the area, as well as
fish, crabs and snails. Fishing platforms dot the length of a canal running
through the area. Few residents in the area have proper land title documents
and compensation for their removal is expected to be contentious.

Manhattan of Laos
An artist's rendition of the proposed new satellite town which appeared in the
Lao press made the area look like a modern Manhattan.

The Lao government seems keen to develop the area along the lines of new
Chinese industrial towns, of which Suzhou, where the Suzhou Industrial Park
Overseas Investment Company is based, is one. Established in 1992, the Suzhou
Hi-Tech Industrial Development Zone, according to the Suzhou government's
website, has attracted foreign investments worth more than $6 billion. Most of
the businesses established in the zone are in the IT industry, with others
involved in software, precision machinery and chemicals.

Whether Laos could or should attempt to duplicate such commercial feats is
debatable. While the new town scheduled for construction in the That Laung
marsh is not likely to reach soon that level of development, it gives an
indication of what the Lao government and its Chinese investors are aiming at.
While development on this scale may bring in much-needed investment and
employment, the question detractors continue to ask is where will all these
workers come from?

To build the SEA Games stadium, the China Yunnan Construction Engineering
Company Group Corporation has imported thousands of Chinese workers due to the
severe shortage of skilled Lao labor. Although the Lao government has
vehemently denied that tens of thousands of Chinese will be moving into
Vientiane to populate the planned new satellite city, Laos itself does not have
the skills or manpower to construct the city on its own. At current education
levels, it also does not have the ability to operate a high-tech city once it
is completed.

This will almost surely necessitate the immigration of thousands of workers and
specialists, most probably from China. Lao government figures estimate 30,000
Chinese already live in Laos, but most analysts believe the real figure to be
perhaps 10 times higher. Stores owned and operated by Chinese people have
sprung up across northern Laos, while other Chinese have settled into remote
villages as foremen and workers on commercial agriculture projects.

Vientiane, like every city in Southeast Asia, has a Chinese population, which
has been accepted as part of the community as much as Vietnamese immigrants
have. Now the fear among many people in Vientiane is that the Chinese will no
longer be simply neighborhood businessmen and shopkeepers, but actually own a
large slice of the city itself and encourage thousands of their countrymen to
immigrate and dominate the capital's business, social and cultural life.

Lao government spokesman Yong Chanthalangsy downplays such concerns. Citing Lao
investment laws, he told Asia Times Online that 85% of a business must be
Lao-owned and that priority must be given to the recruitment of Lao workers.
"Some professions are reserved for our population," he said, without
elaborating. He noted however that the government acknowledges that some skills
are lacking in the Lao labor force and that the government has agreed to allow
foreign companies in certain cases to import skilled labor. "We need foreigners
for jobs for which we cannot satisfy the demand. We will continue to recruit
for these."

He did concede that there is a problem of Chinese workers remaining in Laos
after the completion of projects, which is clearly the case in the country's
northern regions, where Chinese companies have overseen new road projects.

"We must strengthen enforcement of the law to prevent people from staying. The
government will take a closer look, monitor and strengthen the law on foreign
laborers in our country," he said. He noted that 1,800 Chinese laborers
authorized by the government